Indian Cinema: A genie in the bottle?
It’s a cliché to state that India produces the largest number of movies in a year! However, does that necessarily translate into a meaningful market for players in this sector?
An analysis of PwC’s Global entertainment and media outlook 2017–2021 puts the Indian box office at 4.3% of the global market; at US$1.7 billion. It ranks as the fourth-largest in the world after the US, China and Japan. This in itself is quite incredible considering that it has a significantly low number of screens (a predominant number of them being non-digitised) and considering that screen size in US and China is approximately three and four times larger than screens in India, respectively. To add to this, the average admission prices in India hover under a dollar, whereas in China and the US prices are above US$5 and close to US$9, respectively.
So, how does India still rank as the fourth-largest market (and expected to be the third-largest by 2021)?
This is purely on the strength of the number of admissions: India is expected to have annual admissions of over 2.3 billion by 2021, compared with just a little over 2 billion for China and approximately 1.2 billion for the US.
The combined effect of all these factors means that that the Indian box office will grow at a CAGR of 10.4% from 2017 to 2021, as compared to a global CAGR of 4.4%, increasing India’s share of the global box office revenues to 5.7%. The above numbers are based on possibly modest expectations on the pace of growth in screens, digitisation of screens as well as admission prices.
It is important to consider one more factor here: in absolute dollar terms, India will be the ninth-largest entertainment & media (E&M) market in the world by 2021 (today it is the twelfth-largest). However, the per capita spend on E&M is expected to be merely US$32. (There is no other country in the top 10 with a PCI spend of less than US$200 per annum.) It is obvious that the overall growth in the Indian economy is fueling the growth in the cinema sector as well. But given the size of the market in terms of potential audience and the number of films produced, one should be aspiring for a higher growth rate. A few aspects to be considered in this respect:
- While the advanced markets of North America and Western Europe struggle with the impact of non-linear platforms for movie consumption (evidenced by windows for exclusive cinema play getting shorter), India is still some years away from feeling the impact of such digitization, though rampant piracy is a concern.
- Indian producers are getting ambitious, with respect to large projects that are not necessarily movie-star driven (e.g., Bahubali, India’s first major successful production which involved significant use of animation and VFX technology). If this trend continues, it will provide for a significant surge in average admission prices.
- Indian movies are getting marketed better in foreign territories and, through experience, India will market the right kind of cinema to not only the Indian diaspora, but also to foreign audiences (even in markets like China, which have quotas for the release of foreign productions).
- The potential of the Indian market would allow foreign studios to seriously consider re-entry into the Indian market, possibly with a different strategy than what they employed in their earlier endeavor.
- There is a strong aspiration for audiences to consume movies in their local language (non-Hindi), which will reduce the dominance of Bollywood, and produce a broader consumption pattern.
- Most importantly though, government policies including tax structures and levies, creating an enabling environment for proliferation of screens combined with stricter actions against piracy, would be more determinative of the pace of growth.
All in all, there are reasons to be optimistic that India’s growth in box office revenues, will be sustained, and possibly even be improved upon, beyond the Outlook forecast period.